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Unpredictable World Cup Leads
To Jersey Shortages, Overstocks

By

Maureen TkacikStaff Reporter of The Wall Street Journal

Updated July 1, 2002 5:54 p.m. ET

LOS ANGELES -- From dusk till dawn on June 21, the Koreatown here was awash in red. Sheer force of will had propelled the 44th-ranked Korean national soccer team to the World Cup quarterfinals, and tens of thousands of fans wearing red, the team color, flooded parks, shopping malls, hotels and barbecue joints to catch the late-night match.

World Cup 2002

See more coverage of World Cup 2002, including scores and schedules, at the World Cup page.

Strikingly, though, nobody sported a team jersey. That is because
Nike,
which outfits the Korean national team, didn't sell any of the team's replica jerseys to retailers outside Korea. Nike's own Nike Town store in Beverly Hills never got any. The Soccer Store in Glendale, near Koreatown, never got any. And Niky's Sports, a well-known soccer specialty retailer in the heart of Koreatown, didn't get any, either. Niky's manager Peter Orellana figures he easily could have sold a few thousand of the $90 jerseys, but those he ordered never showed up: They were diverted to South Korea, which had sold out of jerseys weeks before. Demand was pushed even higher when South Korea won its quarterfinal match against Spain, before losing in the semifinals against Germany.

Meanwhile, half a world away, French newspapers report thousands of replica French jerseys are sitting in an
Adidas-Salomon
warehouse, "unsellable." France, the 1998 Cup champion, played miserably in the preliminary round and went home early. Adidas denies it has any unsellable jerseys on hand, but a spokesman concedes demand for the French jersey was "affected" by the team's lousy performance.

Nike and Adidas each spend tens of millions of dollars annually placing bets on national teams that make or break every four years at World Cup. When Adidas-sponsored France beat Nike team Brazil to win the championship in 1998, the German company ran ads in European papers that read "Adidas-3, Nike-0." Sunday, Nike staked its claim to victory in the 2002 sponsorship battle, as Brazil defeated Adidas's Germany 2-0 in the final game in Yokohama, Japan.

But both companies would be hard-pressed to call themselves winners. While the unpredictability of this Cup has been great for ratings -- even in countries such as the U.S., where soccer isn't a national obsession -- it has been less than great for the sportswear companies. While there are many reasons Nike and Adidas spend so much money on the Cup -- brand exposure is the most-often cited reason -- replica jerseys are one of the best ways the companies make back the tremendous cost of outfitting national teams. Most of the top national teams have 10-year, nine-figure "kit" contracts with one of the two companies.

Kit contracts give the sportswear companies the right to sell official team jerseys, usually priced between $70 and $90 apiece. In return the companies pay the teams cash and outfit them with uniforms, bags, towels, jackets and other apparel. Nike's 10-year contract with Brazil is valued at $200 million. Even its 10-year contract with the U.S., a mere up-and-comer, totals $100 million, according to a person close to the U.S. team.

But orders are taken and jerseys are sewn months before a team is battle tested on the field. Despite the steep price Nike paid to sponsor the U.S. team, the company hedged its bets on the team after its dead-last finish in the 1998 World Cup. Although it has a contract with American prodigy Landon Donovan, Nike used only non-U.S. soccer players in its multimillion-dollar World Cup ad campaign and produced a mere 20,000 U.S. jerseys. Most were sold to die-hard fans before the games even began.

And then, the U.S. upset Portugal, advanced to the quarterfinals and tripled ESPN's previous World Cup ratings record. Demand for U.S. jerseys soared. To satisfy U.S. team fans, Nike, Beaverton, Ore., started scouring its European retailers for extras, while small pirate operations gladly stepped in to fill the void with knockoff jerseys.

The long lead time needed to make, order and ship the items ahead of a deciding competition raises the stakes for the sports companies and retailers alike.

"Everyone wants to buy the winner's jersey, but it was just impossible to foresee who was going to win," says Ray Evans, a buyer for the European soccer catalog Kitbag.com. Mr. Evans, who ordered his World Cup stock a year ago, says his catalog is stuck with a slew of Holland national-team merchandise. Holland, one of Nike's pricier national teams, never even made it to the Cup. The only team whose kit Mr. Evans didn't buy, Senegal, ended up humiliating France in the preliminary round and making it to the quarterfinals. Then there are France and Argentina, two teams whose Adidas jerseys, T-shirts, shorts and jackets Kitbag.com stocked by the tens of thousands. Neither made it past the preliminary round. Mr. Evans is sure he'll eventually sell the stuff -- the jerseys won't go out of season for another four years -- but it will be "slow," he says, and he won't be placing more orders. "Meanwhile, do I order more U.S. and Korea kit? It's so difficult to say," he says. "I've gotten literally thousands of requests for U.S. team kit -- but will they still want it a year from now?"

Celina Sosa, manager of Soccer Store, isn't sure. In 1998, thinking of the Los Angeles area's nearly one million-strong Korean community, she bought South Korean jerseys. "I had to mark those things down 80%," she says. But she may place a bigger order next time. "Who would think the South Koreans would become so passionate? Maybe this will last."

Ad Notes ...

Ad industry can't bank on a strong recovery.

Zenith Optimedia Group expects global ad spending on major media to fall 0.5% to $302.03 billion in 2002 compared with the prior year. In December, Zenith forecast slight growth of 0.8% for 2002.

Zenith expects major-media ad spending in the U.S. to total $133.87 billion in 2002, up from its forecast of $132.56 billion in April, but about even with its December prediction of $133.65 billion.

Citing worse-than-expected conditions in Europe and continuing weakness in Japan, Zenith predicts global ad spending won't see a full-year rise until 2003, when it will grow 3.2%. This is below the 3.6% forecast in December.